Compania Maritima S.A., of Santiago de Chile is a merchandising company

P5-20 Compania Maritima S.A., of Santiago de Chile is a merchandising company that supplies a variety of American products to the Chilean market. The company’s income statements for the three most recent months follow:

	Compania Maritima S.A. Income Statements For the Three Months Ending June 30
		April	May	June
	Sales in units.......................................................	6,500	7,400	7,000
	Sales revenue......................................................	P260,000	P296,000	P280,000
	Cost of goods sold.............................................	78,000	88,800	84,000
	Gross margin.......................................................	182,000	207,200	196,000
	Selling and administrative expenses:
	Advertising expense......................................	5,000	5,000	5,000
	Shipping expense...........................................	67,500	75,600	72,000
	Salaries and commissions............................	30,800	34,400	32,800
	Insurance expense.........................................	4,000	4,000	4,000
	Depreciation expense....................................	2,500	2,500	2,500
	Total selling and administrative expenses....	109,800	121,500	116,300
	Net operating income........................................	P  72,200	P  85,700	P  79,700

(Note: Compania Maritima S.A.’s Chilean-formatted income statement has been recast in the format common in the United States. The Chilean dollar is denoted by P.)

Required:

  1.   Identify each of the company’s expenses (including cost of goods sold) as either variable, fixed, or mixed.

  2.   Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.

  3.   Redo the company’s income statement at the 7,000-unit level of activity using the contribution format.

CHECK FIGURE

(2) Shipping: P9,000 per month plus P9.00 per unit

TUTORIAL PREVIEW

Analysis of the mixed costs	Units	Shipping expense	Salaries and Commission expense
High activity level	7,400	P 75,600	P 34,400
Low activity level	6,500	67,500	30,800
change
	Correct!	Correct!	Correct!

File name: P5-20 Compania Martima.xls    File type: xls  PRICE: $9